Thestar.com
Multi-tier broadband on its way
Tyler Hamilton
It now appears imminent that Rogers Cable Inc. and Bell Canada will introduce premium high-speed Internet services as their attention shifts from customer growth to corporate profits.

And while that's good news for investors, it's bad news for consumers who in the past have enjoyed the most affordable broadband services in the world with minimal restrictions on use.

Average users are already paying more, and power users or "bandwidth hogs" will soon have to pay extra for their heavy consumption. Considering the trend toward higher pricing in the United States, this was inevitable.

According to e-mails exchanged earlier this month between the Residential Broadband Users Association and Alek Krstajic, senior vice-president of sales and marketing for Rogers Cable, discussions are already under way regarding the beta-testing of a premium cable-modem service, one that would allow download speeds of 5 megabits per second and an upload rate of 500 kilobits per second.

The current standard service promotes speeds of "up to" 3 megabits per second but we all know what "up to" really means, like when clothing sales promise "up to" 90 per cent off. The cost of this package recently increased by $5 to $44.95 a month, excluding sign-up rebates.

A significantly slower "lite" service was introduced this month for $24.95 a month. It's unclear at the moment how much Rogers would charge for a premium package.

Word has it that Rogers staff, including Krstajic, met with a group of subscribers recently to discuss such issues as service "tiering" and bandwidth "throttling" that is, figuring out ways to offer premium packages or a pricing scheme based on the amount of bandwidth consumed each month.

Rogers spokesperson Taanta Gupta confirmed the meeting did take place, but wouldn't reveal what was said. "We never discuss the content of these meetings," she replied.

Whatever the case may be, there's no question that Rogers needs to find a way, and quickly, of squeezing more revenues out of existing customers.

Last Thursday, Rogers released its first-quarter subscribers numbers, and while it showed a healthy year-over-year increase of 44 per cent, closer examination of the first quarter itself shows that Rogers had a dismal winter.

For the period ending March 31, the company had only 21,200 net additions less than half compared to 56,200 in the previous quarter. In the quarter before that, Rogers gained 43,900 subscribers. In fact, the company's first-quarter 2001 subscriber numbers are the worst it has posted in at least nine consecutive quarters.

Financial analysts agree it wasn't a stellar performance. The first quarter is traditionally the weakest of the year, but on top of that, the lower results could be a sign that potential customers were scared off with price increases.

It also indicates that the high-speed Internet market in Canada has matured to the point where the easy money is already being made. Convincing less savvy Internet users to sign up for a high-speed service they don't really need will be a growing challenge. Does a stay-at-home mom who uses mainly e-mail and surfs a few Web sites for news or recipes really need a broadband connection? Probably not.


Customers should be able to accurately measure and compare the value of one service against the value of the other
Will she pay for it? Definitely not.

Will she need it one day? Probably but shareholders have a way these days of being impatient.

Nearly 3 million Canadians currently subscribe to a high-speed Internet service, based on numbers from Rogers, Bell (and family), Cogeco and Videotron in the east, and Telus and Shaw in the west. Over time, there's no question that more of the population will have a thirst for broadband, particularly as data-intensive Internet applications, such a video streaming or multimedia e-mail, become more commonplace on the Web.

Until that time comes, companies such as Rogers will have to start making more of what they have.

"You can't grow at the same rate forever, it's impossible," says Robert Bek, an analyst from CIBC World Markets. "It's always going to be a fact of life that when you reach a certain penetration level you have to look for additional opportunities."

Bell appears to be on the same trajectory as Rogers. Certain documents have made their way onto Bell Sympatico's Web site that would seem to indicate the company is flirting with the idea of limiting the amount of downloads or uploads a person can make each month. Any amount of traffic that exceeds that limit would carry an additional fee.

All of this makes sense, of course. And while some customers might not like it, others will welcome the variety and flexibility offered through new pricing plans.

On the other hand, in the absence of rapid growth and with carriers now focused on extracting more revenues from the customers they have, the responsibility now falls on companies such as Rogers and Bell to improve the quality of their product and customer service.

No longer should high-speed customers have to hear excuses about "growing pains" that are normal for any industry experiencing phenomenal growth. If the market is more mature, as analysts are saying, there should be no more talk of unexpected volume or overwhelmed call centres or surprise network glitches things that Rogers customers in particular know very well.

Furthermore, if customers are to pay a specific price for a specific package, they should be able to accurately measure and compare the value of one service against the value of the other.

If the line between two tiers of service is not crystal clear, then the service provider has failed and may be guilty of deceptive marketing.

All in all, I think Rogers and Bell have worked out a lot of kinks in their high-speed services. As both companies introduce tiered services and so-called "bit caps," here's hoping the improvements that have been made aren't erased in the process.


Tyler Hamilton writes about technology and the Internet every Monday in @Biz. Reach him at thamilt@thestar.ca




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